MUMBAI:  Capital Markets regulator Securities and Exchange Board of India (SEBI )on Monday proposed a minimum price band of 5 percent for public issues through book built process and sub-categorization of non-institutional investors. A consultation paper issued by the regulator today on review of price band and allotment allocation methodology in initial public offerings through the book building route has proposed a minimum price band.

The paper has also proposed to introduce a draw of lots system for allocation to non-retail non-institutional investors in the allotment process in cases of oversubscriptions. These investors can apply for a minimum of 200,000 rupees worth of shares in IPOs and typically comprise high net worth individual investors. The paper has also proposed splitting this investor category into two subgroups to improve the allotment chances of investors applying for shares between 200,000 rupees and 1 mln rupees. As per current norms, IPOs done through book building have to prescribe a price band where the upper price should not be more than 1.2 times the lower price. IPOs done without book building have to indicate a single fixed price in the red herring prospectus.

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